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Sara Nixon is looking for a fixed-income investment. She is considering two bond issues: a. A Treasury...

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Finance

Sara Nixon is looking for a fixed-income investment. She isconsidering two bond issues:

a. A Treasury with a yield of 5%

b. An in-state municipal bond with a yield of 4% Sara is in the33% federal tax bracket and the 8% state tax bracket.

Calculate a) Treasury taxable equivalent yieldand b) Muni taxable equivalent yield.

Which bond would provide Sara with a higher tax-adjustedyield?

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